Optimal Incentive Contracts for Experts
AbstractThis paper analyzes optimal incentive contracts for information acquisition and revelation. A decision maker faces the problem to design a contract that provides an expert with incentives to acquire and reveal information. We show that it is in general not optimal to reward the expert if his recommendation is confirmed. The common observation that experts are paid when their recommendation is confirmed can be explained by incomplete information about the expert's cost to increase the precision of his information. We extend the model to analyze contracting with multiple experts, the timing of expertise, and the provision of incentives when the realized state is not verifiable
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Bibliographic InfoPaper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse6_2004.
Date of creation: Apr 2004
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Expertise; Forecasting; Incentives; Information Acquisition;
Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
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